definition
The process of greater interdependence among countries and their citizens.
Globalization
When certain aspects of a product’s manufacture are performed in more than one country.
Outsourcing
Organization that embodies the main provisions of GATT, resolving trade disputes among member nations
World Trade Organization (WTO)
a nation could regulate its domestic and international affairs so as to promote its own interests through a strong foreign trade sector
Mercantilists
British economists
"The Wealth of Nations" author
leading advocate of free trade
principle of absolute advantage
Adam Smith
An enterprise that cuts across national borders and is often directed from a company planning center that is distant from the host country
Multinational enterprise (MNE)
Moving from one country to settle in another.
Migration
provides loans to developing countries aimed toward poverty reduction and economic development
World Bank
Asserts that a country exports those goods that use its abundant factor more intensively.
Factor-endowment theory
- favorable trade balance/minimize imports
- advocated government regulation of trade
Mercantilists
The ratio of a nation’s exports and imports as a percentage of its gross domestic product (GDP).
Trade Openness
A rich country specializes in manufacturing niches and gains productivity through groups of firms clustered together, (same product and vertical linkages)
Agglomeration economies
A group of nations that sells petroleum on the world market and attempts to support prices higher than would exist
Organization of Petroleum Exporting Countries (OPEC)
A nation will import goods in which it has an absolute cost disadvantage and export those goods in which it has an absolute cost advantage
Absolute Advantage
a wealthy London businessman
"The Principles of Political Economy and Taxation" author
principle of comparative advantage
David Ricardo
Foreign acquisition of a controlling interest in an overseas company or facility
Foreign direct investment
Headquartered in Washington, and consisting of 184 nations, the IMF can be thought of as a bank for the central banks of member nations
International Monetary Fund (IMF)
even if a nation has an absolute cost disadvantage in the production of both goods, the less (or more) efficient nation should specialize in and export the good in which less (or more) inefficient
comparative advantage
2 Swedish economists
One was awarded the 1977 Nobel Prize in Economics
factor-endowment theory
Eli Heckscher and Bertil Ohlin
Includes those of North America and Western Europe, plus Australia, New Zealand, and Japan
Advanced nations
many manufactured goods such as electronic products and office machinery undergo a predictable trade cycle
product life cycle theory
•U.S. economist was born in Austria.
• invented Opportunity cost theory
• Published “Theory of International Trade” in 1936.
Gottfried Haberler